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Two giants of the digital book world collide over profits

Amazon have always put their customers first. From fast delivery times and one-click-downloads to the highly competitive, borderline predatory pricing; regardless of where you sit on the fan-spectrum, it’s undeniable that Jeff Bezos’ strategy puts good customer service at the centre.

For this reason, and others, Amazon’s boycotting of Hachette, (largely owing to increased pressure from their investors) has exploded into a major multi-national news story. Not only are books from some top selling authors such as JK Rowling now cheaper to buy elsewhere; but a number of titles have an estimated 2 – 3 week delivery period. Although the dispute is over the profits made on e-books, crucially, it’s the delivery of print books that Amazon are using as their tactic to win the dispute.

The relationship between Amazon and Publishers has always been somewhat byzantine in its complexity. On one hand, Amazon is a one of the, if not the top retailer, responsible for over a third of all book sales; constituting chunky proportion of publishers profits.

On the other hand with their publishing arm, which is now offering authors 70% royalty contracts; and with slashed prices reducing customers perceptions of what a book should cost, they are a serious threat to these aforementioned traditional publishers. Not to forget the negative impact the retailer giant has had on the high-street bookstore, which is a huge issue with a myriad of complexities unto itself. Amazon coming head-to-head with Hachette over how to split the profit of digital books has further muddied the waters of this troubled and complicated publisher/retailer relationship– largely to the detriment of Amazon’s relationship with the end consumer.

Authors are considering this dispute over profits, and wisely keeping their options open. Smart authors will be building their own relationships with readers, making sure that regardless of the final outcome; they will be able to steer sales in another direction. Even authors who were previously benefiting from their relationship with Amazon are turning on the giant. Malcolm Gladwell being one, commented that:

I have sold millions of dollars’ worth of books on Amazon, which means I have made millions of dollars for Amazon. I would have thought I was one of their best assets. I thought we were partners in a business that has done well. This seems an odd way to treat someone who has made you millions of dollars.

But perhaps there’s some light at the end of the tunnel, reports earlier this week suggest that the dispute is easing up, since both Amazon and Hachette are sworn to secrecy in the negotiations, getting a frank account of internal proceedings is rare (sans any leaks of course). However, in yesterday’s Huffington Post it was reported that Amazon is now re-stocking some Hachette titles, which would represent a major step forward in rebuilding this partnership.

If Amazon have won the battle, they will have alienated customers and changed the established status quo of the pricing of digital books, which will abolish the agency model for good. They’ll also have shown just how far they’re prepared to go in strong-arming the competition, with tactics that conjure up Microsoft’s relationship with competing OSes back in the 1990s.

If Hachette are the righteous winners, that will prove that Amazon isn’t unstoppable and will set precedent for future pricing control of ebooks. If the ruthless Jeff Bezos and his Seattle-based team win the fight, that will no doubt result in cheaper ebooks for consumers.

Ultimately, the future of ebook publishing depends more on whether customers value Amazon’s distribution arrangements over values and the producers of the content of their e-books, essentially the publishers. I fear we know who will win.